$150 Million In Transocean Excess Coverage

Judge Carl Barbier found that certain underwriters at Lloyd’s of London and various insurance companies have satisfied their obligations under excess policies providing $150 million in coverage to Transocean Ltd. Judge Barbier entered a final judgment dismissing a pair of interpleader actions filed by Lloyd’s and the insurers, holding that the three policies — which form the first layer of excess coverage in Transocean’s tower of policies — have been “fully and properly exhausted.”

The so-called “first excess layer insurers” filed two separate actions in June 2011, saying they faced multiple potentially conflicting and competing insurance claims in connection with the disaster and seeking to ensure that payments were made to the proper entities. The parties to the interpleader actions reached an agreement in December 2011 regarding the payment of Transocean employee settlementclaims, according to court documents. Under the agreement Transocean and BP PLC asked the court to make determinations regarding coverage for, and the reasonableness of, employee settlements that reimbursement was being sought for under the first excess layer policies.

In November, the court issued a ruling regarding reimbursement of certain settlement claims. When added to the amount of the settlements the court previously found to be reasonable, the total approved settlements exceed the first excess layer policies’ $150 million limit, according to the order. Lloyd’s and the insurers filed a motion in December seeking the entry of a final judgment dismissing the interpleader actions.

Judge Barbier’s order comes two months after the Texas Supreme Court ruled that BP isn’t entitled to clam $750 million under Transocean’s policies for the Deepwater Horizon incident. Ruling on a question certified from the Fifth Circuit, the state high court found 8-1 that the Transocean policies don’t cover BP for damages arising from subsurface pollution. The court consulted the drilling contract between the parties to determine BP’s status as an additional insured. The court determined that the only reasonable construction of the drilling contract’s additional-insured provision is that BP’s status as an additional insured is limited to the liabilities Transocean assumed under the contract, thereby precluding BP from claiming coverage for the damages at issue.